Finance Act 2000

109 Insurance business: apportionment rules

(1) In subsection (4)(b) of section 432ZA of the Taxes Act 1988 (linked assets), for the words from “the proportion which” to the end there shall be substituted—

“the proportion A/B where—

A is the total of the linked liabilities of the company which are liabilities of the internal linked fund in which the asset is held and are referable to that category of business;

B is the total of the linked liabilities of the company which are liabilities of that fund.”.

(2) For subsection (6) of that section there shall be substituted—

“(6) In this section—

• “internal linked fund”, in relation to an insurance company, means an account—

  (a)

  to which linked assets are appropriated by the company; and

  (b)

  which may be divided into units the value of which is determined by the company by reference to the value of those assets;

• “linked liabilities” means liabilities in respect of benefits to be determined by reference to the value of linked assets.”.

(3) In the subsections mentioned in subsection (4) below—

(a) in paragraph (a), after “reduced” there shall be inserted “(but not below nil)” and for “values” there shall be substituted “net values”; and

(b) for paragraph (b) there shall be substituted—

“(b) the denominator is the aggregate of—

(i) the numerator given by paragraph (a) above; and

(ii) the numerators given by that paragraph in relation to the other categories of business.”.

(4) The subsections are—

(a) subsection (6) of section 432A of the Taxes Act 1988 (apportionment of income and gains);

(b) subsection (4) of section 432C of that Act (section 432B apportionment: income of non-participating funds); and

(c) subsection (3) of section 432D of that Act (section 432B apportionment: value of non-participating funds).

(5) For subsection (8) of section 432A there shall be substituted—

“(8) In subsection (6) above “appropriate part”, in relation to the investment reserve, means—

(a) where none (or none but an insignificant proportion) of the liabilities of the long term business are with-profits liabilities, the part of that reserve which bears to the whole the proportion A/B where—

• A is the amount of the liabilities of the category of business in question;

• B is the whole amount of the liabilities of the long term business; and

(b) in any other case, the part of that reserve which bears to the whole the proportion C/D where—

• C is the amount of the with-profits liabilities of the category of business in question;

• D is the whole amount of the with-profits liabilities of the long term business.”.

(6) After subsection (9) of that section there shall be inserted—

“(9A) In this section and sections 432C and 432D “net value”, in relation to any assets, means the excess of the value of the assets over any liabilities which—

(a) represent a money debt; and

(b) are liabilities of an internal linked fund in which the assets are held;

and in this subsection “internal linked fund” has the same meaning as in section 432ZA.

(9B) In this section—

• “investment reserve”, in relation to an insurance company, means the excess of the value of the assets of the company’s long term business over the aggregate of—

  (a)

  the liabilities of that business; and

  (b)

  any liabilities of the long term business fund which represent a money debt;

• “money debt” has the same meaning as in Chapter II of Part IV of the [1996 c. 8.] Finance Act 1996.”.

(7) In subsection (5)(b) of section 432C, after “subsection (1)” there shall be inserted “or (2)”.

(8) In Schedule 11 to the [1996 c. 8.] Finance Act 1996 (loan relationships: special provisions for insurers), after paragraph 3 there shall be inserted—

“3A (1) This paragraph applies where—

(a) any money debt of an insurance company is represented by a liability which is a liability of the long term business fund of the company; and

(b) any question arises for the purposes of the Corporation Tax Acts as to the extent to which any debits or credits given for the purposes of this Chapter in respect of that debt or liability are referable to any category of the company’s long term business.

(2) If any debits relate to interest payable in respect of the late payment of any benefits, they are referable to the category of long term business which comprises the effecting and carrying out of the policies or contracts under which the benefits are payable.

(3) If the liability is a liability of an internal linked fund of the company, any debits or credits are referable—

(a) to the category of long term business to which the fund relates; or

(b) where the fund relates to two or more categories of such business, to those categories in the same proportion as the linked assets in the fund are apportioned to them under section 432ZA(4) of the Taxes Act 1988 (linked assets).

(4) In any case not falling within sub-paragraph (2) or (3) above, there shall be referable to any category of long term business the relevant fraction of any debits or credits.

(5) For the purpose of determining that fraction, subsections (6) and (8) of section 432A of the Taxes Act 1988 (apportionment of income and gains) shall have effect as if—

(a) the debits or credits were income not directly referable to any category of business;

(b) the reference in subsection (6)(a) to assets directly referable to a category of business were a reference to assets linked to that category of business; and

(c) subsection (9) of that section were omitted.

(6) In this paragraph “internal linked fund” has the same meaning as in section 432ZA of the Taxes Act 1988 (linked assets).”.

(9) In consequence of the preceding provisions of this section—

(a) in section 431(2) of the Taxes Act 1988 (interpretative provisions in relation to insurance companies), the definition of “investment reserve” shall cease to have effect;

(b) in paragraph 4(2) of Schedule 19AA to that Act (overseas life assurance fund), after “investment reserve” there shall be inserted “(within the meaning of section 432A)”; and

(c) in paragraph 7(3) of Schedule 19AC to that Act (modification of Act in relation to overseas life insurance companies)—

(i) in paragraph (b), for “value” there shall be substituted “net value”; and

(ii) paragraph (c) shall cease to have effect.

(10) This section shall have effect in relation to accounting periods beginning on or after 1st January 2000 and ending on or after 21st March 2000.